IDEX Corporation Reports Second Quarter 2008 Results; 19% Orders Growth, 15% Sales Growth and 10% Increase in Diluted EPS
NORTHBROOK, Ill.--(BUSINESS WIRE)--July 21, 2008--IDEX Corporation (NYSE:IEX) today announced second quarter 2008 results.
New orders in the quarter totaled $402 million, 19 percent higher than the prior-year period. Sales in the quarter totaled $397 million, 15 percent higher than the prior-year period. International sales represented approximately 47 percent of total sales for the second quarter of 2008 compared to 46 percent in 2007.
Second quarter operating income of $74 million was 7 percent higher than the prior-year period. Operating margin of 18.6 percent reflected a 140 basis point decline versus the prior-year period, primarily due to the impact of intangible amortization expenses associated with recent acquisitions. Compared to the first quarter of 2008, operating margin increased by 30 basis points.
Income from continuing operations of $46 million increased 10 percent over the second quarter of the previous year. Diluted earnings per share from continuing operations of 56 cents improved 5 cents, or 10 percent, from the second quarter of the previous year.
Second Quarter 2008 Highlights (from Continuing Operations)
-- Orders increased 19 percent compared to the prior-year period
(8 percent acquisitions, 7 percent organic and 4 percent
foreign currency translation)
-- Sales increased 15 percent compared to the prior-year period
(7 percent acquisitions, 5 percent organic and 3 percent
foreign currency translation)
-- Income increased 10 percent to $46 million
-- Diluted EPS at 56 cents was 5 cents, or 10 percent, ahead of
the prior-year period
-- EBITDA of $87 million was 22 percent of sales and covered
interest expense by more than 21 times
-- Second quarter free cash flow of $61 million represented 132
percent of net income
"Overall, our markets are solid and our business performance for the second quarter of 2008 was strong. Growth in the Fluid and Metering Technologies segment was driven by global demand in the infrastructure-related end markets. In the Health and Science Technologies segment, the growth was driven by core analytical instrumentation, IVD and biotechnology markets. Strength in our engineered band clamping and rescue tools businesses was offset by softness in the fire suppression market within the Fire & Safety/Diversified Products segment. Within Dispensing, we experienced modest growth in both the European and North American markets.
Given our outlook and current market conditions, we expect full year 2008 total revenue growth in the range of 13 to 15 percent and EPS to range from $2.12 to $2.18 compared to $1.90 in the prior year. In addition, 2008 free cash flow is projected to exceed net income by 10 to 20 percent. For the third quarter of 2008, we project total revenue growth in the range of 14 to 16 percent and EPS in the range of 53 to 56 cents per diluted share.
Overall, we are pleased with our second quarter 2008 results and we anticipate continued strong performance in the second half of 2008."
Lawrence D. Kingsley
Chairman and Chief Executive Officer
Business Highlights
Fluid & Metering Technologies
-- Sales in the second quarter of $177.4 million reflected 26
percent growth (16 percent acquisitions, 8 percent organic and
2 percent foreign currency translation). Growth was driven by
continued global demand for infrastructure-related
applications and acquisition performance.
-- Operating margin of 19.5 percent represented a 190 basis point
decline compared with the second quarter of 2007, primarily
due to the impact of recent acquisitions.
Health & Science Technologies
-- Sales in the second quarter of $87.2 million reflected 6
percent growth (3 percent acquisitions, 1 percent organic and
2 percent foreign currency translation). Strong growth in core
analytical instrumentation, IVD and biotechnology markets was
partially offset by the previously announced exit from two
specific OEM contracts.
-- Operating margin of 18.4 percent was flat compared with the
second quarter of 2007.
Dispensing Equipment
-- Sales of $56.6 million in the second quarter reflected 14
percent growth compared with the second quarter of 2007 (3
percent organic and 11 percent foreign currency translation).
The modest growth was balanced evenly between both the
European and North American markets.
-- Operating margin of 25.3 percent represented a 330 basis point
decline compared with the second quarter of 2007, primarily
due to foreign currency translation and selective material
cost increases.
Fire & Safety/Diversified Products
-- Sales in the second quarter of $77.2 million reflected 6
percent growth compared with the prior year (2 percent organic
and 4 percent foreign currency translation). The engineered
band clamping business as well as the rescue tools business
achieved strong growth, offset by weak demand in the North
American fire suppression market.
-- Operating margin of 24.1 percent represented an 80 basis point
decline compared with the second quarter of 2007.
For the second quarter of 2008, Fluid & Metering Technologies contributed 45 percent of sales and 42 percent operating income; Health & Science Technologies accounted for 22 percent of sales and 19 percent of operating income; Dispensing Equipment accounted for 14 percent of sales and 17 percent of operating income; and Fire & Safety/Diversified Products represented 19 percent of sales and 22 percent of operating income.
Restructuring
In July, the company initiated the ceasing of manufacturing operations in the Dispensing segment's Milan, Italy facility. The European operational footprint consolidation is consistent with the Dispensing segment's capacity utilization strategy and is expected to generate $3 to $4 million of annual savings beginning in 2009. The projected restructuring cost is estimated at $5 to $6 million and is expected to be offset by a gain on the divestiture of the facility. Due to uncertain timing of the facility divestiture and formalization of specific severance plans, the net earnings impact is not included in the third quarter or full year earnings per share guidance and will be further discussed in subsequent earnings releases.
Conference Call to be Broadcast over the Internet
IDEX will broadcast its second quarter earnings conference call over the Internet on Tuesday, July 22, 2008 at 9:30 a.m. CT. Chairman and Chief Executive Officer Larry Kingsley and Vice President and Chief Financial Officer Dominic Romeo will discuss the company's recent financial performance and respond to questions from the financial analyst community. IDEX invites interested investors to listen to the call and view the accompanying slide presentation, which will be carried live on its website at www.idexcorp.com. Those who wish to participate should log on several minutes before the discussion begins. After clicking on the presentation icon, investors should follow the instructions to ensure their systems are set up to hear the event and view the presentation slides, or download the correct applications at no charge. Investors also will be able to hear a replay of the call by dialing 888.203.1112 or 719.457.0820 and using conference ID #4450651.
A Note on EBITDA and Free Cash Flow
EBITDA means earnings before interest, income taxes, depreciation and amortization, while free cash flow means cash flow from operating activities less capital expenditures plus the excess tax benefit from stock-based compensation. Management uses these non-GAAP financial measures as internal operating metrics and for enterprise valuation purposes. Management believes these measures are useful as analytical indicators of leverage capacity and debt servicing ability, and uses them to measure financial performance as well as for planning purposes. However, they should not be considered as alternatives to net income, cash flow from operating activities or any other items calculated in accordance with U.S. GAAP, or as an indicator of operating performance. The definitions of EBITDA and free cash flow used here may differ from those used by other companies.
EBITDA and Free Cash Flow bridge
For the Quarter Ended
June 30, March 31,
--------------------- ---------
2008 2007 Change 2008 Change
---------- ---------- --------- --------- ---------
Income before
Taxes $70.7 $63.3 12 % $62.6 13 %
Depreciation and
Amortization 12.2 9.3 30 12.0 1
Interest 4.1 6.1 (33) 5.7 (28)
---------- ---------- ---------
EBITDA $87.0 $78.7 11 $80.3 8
========== ========== =========
Cash Flow from
Operating
Activities $65.5 $63.9 3 % $28.3 132 %
Capital
Expenditures (6.9) (7.4) (7) (6.3) 10
Excess Tax
Benefit from
Stock-Based
Compensation 2.2 1.9 20 0.1 -
---------- ---------- ---------
Free Cash Flow $60.8 $58.4 4 $22.1 175
========== ========== =========
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. These statements may relate to, among other things, capital expenditures, cost reductions, cash flow, and operating improvements and are indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "management believes," "the company believes," "the company intends," and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this news release. The risks and uncertainties include, but are not limited to, the following: economic and political consequences resulting from terrorist attacks and wars; levels of industrial activity and economic conditions in the U.S. and other countries around the world; pricing pressures and other competitive factors, and levels of capital spending in certain industries - all of which could have a material impact on order rates and IDEX's results, particularly in light of the low levels of order backlogs it typically maintains; its ability to make acquisitions and to integrate and operate acquired businesses on a profitable basis; the relationship of the U.S. dollar to other currencies and its impact on pricing and cost competitiveness; political and economic conditions in foreign countries in which the company operates; interest rates; capacity utilization and the effect this has on costs; labor markets; market conditions and material costs; and developments with respect to contingencies, such as litigation and environmental matters. The forward-looking statements included here are only made as of the date of this news release, and management undertakes no obligation to publicly update them to reflect subsequent events or circumstances. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented here.
About IDEX
IDEX Corporation is an applied solutions company specializing in fluid and metering technologies, health and science technologies, dispensing equipment, and fire, safety and other diversified products built to its customers' exacting specifications. Its products are sold in niche markets to a wide range of industries throughout the world. IDEX shares are traded on the New York Stock Exchange and Chicago Stock Exchange under the symbol "IEX".
For further information on IDEX Corporation and its business
units, visit the company's Web site at www.idexcorp.com.
(Tables follow)
IDEX CORPORATION
Condensed Statements of Consolidated Operations
(in thousands except per share amounts)
Second Quarter Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
----------------------------------------------------------------------
Net sales $397,310 $344,482 $768,972 $677,750
Cost of sales 234,102 196,948 450,597 390,552
----------------------------------------------------------------------
Gross profit 163,208 147,534 318,375 287,198
Selling, general
and
administrative
expenses 89,400 78,669 176,468 156,781
----------------------------------------------------------------------
Operating income 73,808 68,865 141,907 130,417
Other income - net 987 521 1,162 1,094
Interest expense 4,092 6,058 9,758 12,437
----------------------------------------------------------------------
Income from
continuing
operations before
income taxes 70,703 63,328 133,311 119,074
Provision for
income taxes 24,649 21,493 45,878 40,408
----------------------------------------------------------------------
Income from
continuing
operations 46,054 41,835 87,433 78,666
Loss from
discontinued
operations, net
of tax - (205) - (369)
----------------------------------------------------------------------
Net income $46,054 $41,630 $87,433 $78,297
======================================================================
Basic Earnings per
Common Share:
Continuing
operations $0.57 $0.52 $1.08 $0.98
Discontinued
operations - - - (0.01)
----------------------------------------------------------------------
Net income $0.57 $0.52 $1.08 $0.97
======================================================================
Diluted Earnings
per Common Share:
Continuing
operations $0.56 $0.51 $1.06 $0.96
Discontinued
operations - - - -
----------------------------------------------------------------------
Net income $0.56 $0.51 $1.06 $0.96
======================================================================
Share Data:
Basic weighted
average common
shares
outstanding 81,322 80,595 81,194 80,429
Diluted weighted
average common
shares
outstanding 82,746 82,046 82,511 81,855
======================================================================
Condensed Consolidated Balance Sheets
(in thousands)
June 30, December 31,
2008 2007
----------------------------------------------------------------------
Assets
Current assets
Cash and cash
equivalents $118,538 $102,757
Restricted
cash - 140,005
Receivables -
net 240,028 193,326
Inventories 198,764 177,435
Other current
assets 26,640 23,615
----------------------------------------------------------------------
Total current
assets 583,970 637,138
Property, plant
and equipment -
net 178,318 172,999
Goodwill and
intangible
assets 1,331,055 1,168,785
Other noncurrent
assets 12,075 10,672
----------------------------------------------------------------------
Total assets $2,105,418 $1,989,594
======================================================================
Liabilities and
shareholders'
equity
Current
liabilities
Trade accounts
payable $101,817 $84,209
Accrued
expenses 106,425 99,125
Short-term
borrowings 7,599 5,830
Dividends
payable 9,771 9,789
----------------------------------------------------------------------
Total current
liabilities 225,612 198,953
Long-term
borrowings 403,060 448,901
Other noncurrent
liabilities 202,609 179,017
----------------------------------------------------------------------
Total
liabilities 831,281 826,871
Shareholders'
equity 1,274,137 1,162,723
----------------------------------------------------------------------
Total
liabilities
and
shareholders'
equity $2,105,418 $1,989,594
======================================================================
IDEX CORPORATION
Company and Business Group Financial Information
(dollars in thousands)
Second Quarter Ended Six Months Ended
June 30, (a) June 30, (a)
2008 2007 2008 2007
----------------------------------------------------------------------
Fluid & Metering
Technologies
Net sales $177,358 $141,094 $348,288 $277,800
Operating income
(b) 34,655 30,133 68,900 59,884
Operating margin 19.5% 21.4% 19.8% 21.6%
Depreciation and
amortization $6,450 $4,269 $12,763 $8,118
Capital
expenditures 2,785 3,473 5,176 6,109
Health & Science
Technologies
Net sales $87,247 $82,370 $170,889 $163,090
Operating income
(b) 16,054 15,167 31,133 29,030
Operating margin 18.4% 18.4% 18.2% 17.8%
Depreciation and
amortization $2,885 $2,277 $5,838 $4,846
Capital
expenditures 954 1,129 2,600 2,780
Dispensing
Equipment
Net sales $56,601 $49,859 $106,609 $97,752
Operating income
(b) 14,294 14,248 25,527 25,952
Operating margin 25.3% 28.6% 23.9% 26.5%
Depreciation and
amortization $1,131 $1,030 $2,269 $1,577
Capital
expenditures 1,054 1,462 1,584 1,754
Fire & Safety /
Diversified
Products
Net sales $77,247 $72,808 $145,910 $142,004
Operating income
(b) 18,608 18,117 36,338 33,475
Operating margin 24.1% 24.9% 24.9% 23.6%
Depreciation and
amortization $1,390 $1,529 $2,744 $3,054
Capital
expenditures 2,033 813 3,140 1,699
Company
Net sales $397,310 $344,482 $768,972 $677,750
Operating income 73,808 68,865 141,907 130,417
Operating margin 18.6% 20.0% 18.5% 19.2%
Depreciation and
amortization
(c) $12,164 $9,340 $24,213 $18,479
Capital
expenditures 7,336 7,347 13,313 13,130
----------------------------------------------------------------------
(a) Second quarter and six month data includes acquisition of ADS
(January 2008) and Quadro (June 2007) in the Fluid & Metering
Technologies Group and Isolation Technologies (October 2007) in
the Health & Science Technologies Group from the date of
acquisition.
(b) Group operating income excludes unallocated corporate operating
expenses.
(c) Excludes amortization of debt issuance expenses and unearned
compensation.
CONTACT: IDEX Corporation
Investor Contact:
Heath Mitts
Vice President - Corporate Finance
(847) 498-7070
SOURCE: IDEX Corporation